Let your investment term match your financial goal

Goals require specific planning when it comes to financing them. Here it is important to define the investment term. The reason for this is because there is a specific goal at the end of the term which requires a corpus or a fund to fulfill that goal. For eg. if you wish to go on a holiday abroad after 6 months or 1 year, you have to put in or save money over the next 6 months or 1 year and build a corpus to finance your vacation. This is a short term goal which spreads anywhere between 6 months to 1 year.

A medium term goal which requires a higher corpus and is moderate in nature spreads over 2-3 years say to buy a car or furnish your home.

Long term goals could be anywhere between 3 years + and may be even up to 30 years. The quantum of corpus is much higher which you need to build gradually and steadily. With a long term goal you circumnavigate the financial needs say to take care of your child’s higher education or plan your post retirement income source or say to buy a house or just about anything which requires a relatively large corpus.

That explains the short, medium and long term goals. In other words, whichever investment you park your money in, it should co-relate with the term of the investment.

If you have a short term or a medium term goal, you can’t be putting your money in a risk oriented plan because an unprecedented risk factor could deteriorate your principal amount fast and there will be a paucity of time for recovery. Long term goals can be a little high risk oriented because it has been historically proved that the risk can be mitigated when the time length is long.

Thus you need to plan your investments wisely by so-relating your term and goal.